economics

1. what would be an example of a market failure?
a higher prices for hotel rooms at holiday periods
b noise pollution experienced near major airports
c periods of inflation when prices of all goods and services rise
d 20% of a country’s population live in poverty

2 what is a necessary condition for the achievement of productive efficiency?
a the removal of all externalities
b _ the elimination of all divergences between private and social costs
c equality between price and marginal cost in all industries
d_ the production of a good at minimum average cost for a given output

3 the table shows the expected costs and benefits from four government projects. the government
can afford only one project.
which project should the government choose?
private benefits | external benefits private costs external costs
($m) ($m) ($m) ($m)
a 40 200 60 70
b 60 160 100 20
cc 100 210 100 120
d 150 90 120 140

4 which statement about indifference curves is correct?
a the indifference curves for inferior goods can show higher satisfaction on lower curves.
b_ the indifference curves for normal goods show a diminishing marginal rate of substitution.
c_ the indifference curves for perfect complements go through the origin.
d_ the indifference curves for perfect substitutes are right-angled.

5 the diagram shows the marginal utility (mu) that an individual derives from a good at different
levels of consumption.
80 ; : : .
utility =70----> eee ee ee
(units) 60----------> c<cilat isetaieel dante aieates eeeton
sn a ge ge ee
0 ' i ' 1
1 2 3 4 5 6 7 8
quantity (kilos)
the utility he derives from the last $ he spends on every good is 4 units.
assuming the marginal utility of money is constant, which quantity will he purchase if the price of
the good is $10?
a 4kilos b_ 5skilos c6 kilos d 7kilos

6 the takeover of a life assurance company by a bank is an example of
a horizontal integration.
b lateral integration.
c vertical backwards integration.
d vertical forwards integration.

7 imperfect competition is distinguished from perfect competition in that, in long-run equilibrium,
a supply is elastic.
b demand is inelastic.
c marginal cost will be below average cost.
d_ average revenue will be below marginal revenue.

8 the diagram shows the cost and revenue curves of a firm in imperfect competition.
at which output will the firm produce if it wishes to make some supernormal profit to satisfy its
shareholders and at the same time to allocate resources efficiently?
cost, mc
revenue
atc
ny, i>
i ar
= a b\cd output
mr

9 what makes it harder for a small firm to compete against large firms in the same industry?
a copyrights on the product have expired.
b customers want individual product designs.
c_ the cost of entering the industry is low.
d_ the industry’s product is standardised.

10 a firm operates at the maximum point on its average product curve.
what necessarily follows?
a average variable cost is at a minimum.
b~ marginal cost is at a minimum.
c_ marginal product is at a maximum.
d total profit is at a maximum.

11 the dominant firm in an oligopoly sets up a research institute to carry out new product
development.
which two features of oligopoly are present in this project?
a creation of barriers to entry and collusion
b_ creation of barriers to entry and non-price competition
c_non-price competition and price leadership
d price leadership and collusion

12 what is the essential feature of nudge theory?
a the aim of satisficing
b the establishing of a legal requirement
c_ the existence of a contestable market
d the idea of persuasion

13 the diagram shows a firm’s marginal revenue curve.
marginal
revenue
oo heat
which total revenue curve corresponds to this firm’s marginal revenue curve?
a b cc d

14 to control the cost of living governments have sometimes imposed a maximum price on certain
goods that is below the free market price.
what is often an undesirable side effect of such policies?
a accelerating general inflation
b_anincrease in profits above normal profits
c_anincrease in the stocks of unsold goods held by firms
d shortages of the good

15 the diagram shows the effect of the introduction of a national minimum wage, wy, in an
occupation where workers are employed by a profit-maximising monopsonist.
wage mc,
rate ss,
hi las
wy
ui
ww, re
boi mrp, = d,
ie) q,q,q,
employment
what happened to total wages received by the workers in the occupation?
a decrease from ow2vq2 to owyuq3
b_ decrease from ow2zq, to owwuq3
c_ increase from ow,xq, to owmyq,
d_ increase from ow,xq, to owyuq3

16 vwvnat is defined as the payment made to a factor of production over and above that necessary to
keep the factor in its present use’?
a economic rent
b_ normal profit
c opportunity cost
d transfer earnings

17 the table shows the values of the gini coefficient for some countries in 2007.
| ei coecin |
namibia 74.3
zambia 50.4
france 32.7
denmark 24.7
using the information above, which statement is correct?
a income is distributed more equally in denmark than france.
b_ income is distributed more equally in namibia than zambia.
c_ income per capita is higher in zambia than namibia.
d_ there are proportionally more people below the poverty line in zambia than france.

18 ihe table gives details of the carrying capacity and number of british licensed registered ships
over 100 tons between 2010 and 2014.
number of ships 712 664 643 577 500
what can be concluded about british shipping between 2010 and 2014?
a_ the average size of british registered ships increased.
b the number of voyages made by british registered ships fell.
c_ the productivity of british registered ships peaked in 2012.
d_ the capacity of the british registered fleet fell continuously.

19 which curve is shown in the diagram?
income
inequality /
oo ' ,
income per capita
a kuznets curve
b laffer curve
c_ lorenz curve
d_ phillips curve

20 other things remaining equal, what will reduce the level of national income in an economy?
a _afallin planned savings
ba fall in the marginal propensity to import
c_anincrease in the average propensity to consume
d_ areduction in the level of defence expenditure

21 an increase in government expenditure is financed by borrowing from the central bank.
other things being equal, what will be the effect on the money supply?
a it will decrease.
b it will increase by an amount equal to the increase in government expenditure.
c_ it will increase by more than the increase in government expenditure.
d it will remain unchanged.

22 the diagram shows the output gap as a percentage of potential gdp for the us from 1960 to
2014.
“la
% of 4 a
potential | ft | |
gdp 2 a
ot
ovi a yy vi
2 pv |
hi to v v
3 i 4 1 i
1960 1970 1980 1990 2000 2010
year
in which year was the output gap most likely to result in inflation?
a 1966 b 1970 c 1982 d 1992

23 the diagram shows data on various aspects of four countries.
which country is likely to be most developed?
% of population
in rural areas key
— countrya
; ------- country b
fl —-—-— country c
fas country
pe se ny
a oa
average years life expectancy
gdp per capita
(us$ ppp)

24 the diagram shows quarterly changes in japan’s gdp from 2010 to 2015.
3
growth 2
(%)
0
-1
-2
-3
2010 2011 2012 2013 2014 2015
year
how many recessions occurred in japan during this period?
a 2 b 3 cc 5 d 10

25 steps in calculating the working-age population are shown.
eww o2..... = labour force
e labour force + ......3...... = working-age population
which row has the correct terms to complete gaps 1, 2 and 3?
a ee ee ee
a employed underemployed unemployed
b employed unemployed not in labour force
cc not in labour force underemployed employed
d unemployed not in labour force underemployed

26 the graphs show consumer prices and unemployment for ireland between 2002 and 2007.
content removed due to copyright restrictions.
what can be concluded from the graphs?
a_ between 2003 and 2004, unemployment and prices moved in the same direction.
b_ prices were at their lowest in 2004.
c_ prices rose continuously over the period.
d the number of unemployed workers fell over the period.

27 which combination of policy measures is most likely to reduce unemployment?
a __ lowering both the exchange rate and domestic interest rates
b_ lowering the exchange rate and increasing direct taxation
c_ raising both the exchange rate and domestic interest rates
d raising the exchange rate and increasing direct taxation

28 a government responds to cyclical fluctuations in output by keeping tax rates and benefit rates
unchanged.
what is the government seeking to achieve by adopting this fiscal policy?
a to allow automatic stabilisers to work
b_ to keep output at the full employment level
c_ to maintain a constant balanced budget
d_ to ensure that its budget is in surplus over the trade cycle

29 manufacturing output in china fell to the lowest for 15 months in june 2015. the government
wanted to stimulate the economy.
what would be most likely to help the economy recover?
a adecrease in government spending
b  adecrease in unemployment
c_anincrease in income tax
d_anincrease in interest rates

30 the economy of a country is simultaneously experiencing a balance of payments deficit, a budget
deficit, demand-pull inflation and unemployment. the government decides to cut personal income
taxes.

what is most likely to be its main macroeconomic objective?
a_ to improve the balance of payments position

b_ to reduce the budget deficit

c_ to reduce the level of unemployment

d_ to reduce the rate of inflation

Solve 9708_s17_qp_31